A blog about economics, finance, business and corporate governance. My background is in economics, with degrees from Columbia and Johns Hopkins. A career in international development, equity capital markets and as a corporate finance chief and board member lead me to think about events in a different way--hence the blog's name.

Tuesday, October 8, 2013

Bill May Return to Microsoft, or Not.

With all the hot news stories--like the budget deal and the Middle East--cooling into sludge, it's the moment for the New York Times to opine about the "widespread fascination" about the future role of Microsoft Chairman Bill Gates. The story tries desperately to titillate the reader about Mr. Gates' increased presence at product introduction meetings.

On the other end of the spectrum, I have to applaud two institutional shareholders who, according to the New York Times, approached the company to have it consider having Mr. Gates relinquish his Chairman's position because it would inhibit a new CEO from adopting radical changes from the existing strategies that have cemented the company's role as a tech follower, and a mediocre one at that.

I don't believe that either of the above two events will come to pass. Mr. Gates is having too much fun with his philanthropic projects in education and global health to return to the drudgery of extracting this company from the mud and getting its culture jump-started again. As a co-founder and large owner, he wouldn't countenance losing face by relinquishing the Chairman's role without some future bridge-building to a CEO whom he respects and who has produced some results. Too early for this.

The CEO of Ford makes the current short list of successors to Steve Ballmer. Sell the stock on the announcement of Mulally's appointment as Microsoft CEO. Watch the exodus begin on the servers and tools sides of the business. Damage control all around, because it makes no sense. Nothing else looks new, except that people like former Motorola Mobility CEO Sanjay Jha don't appear on today's list.

On the Microsoft Surface side, it's interesting to hear some different views about the Surface RT. About a year ago, writing about the launch, we made a couple of key points:

"The question now becomes, can they act like a consumer products company and tell their story to the customer?

"The cost of making every buyer happy is a better investment that buying back shares. That cost is just another form of advertising and brand rehabilitation." Can they commit to making buyers happy?

Unfortunately, the answer to both these questions has been "No." We know that the company took a write-down, forget that. Some British IT users call Microsoft's marketing of the Surface RT "absolutely shocking," which in American English would translate into a profane phrase. Why?

We've written before that most people still use their iPads as photo albums, video cameras, and places to find maps or restaurant reviews. They are not productivity tools, and far from it. The British buyers don't care about the shortage of "rubbish apps that you download and never use again." Rather, they do like being able to use Office for document work and to connect easily to printers. This indeed is productivity. So Microsoft produced something better, but they didn't communicate to users what they had produced and why it was better.

Now, they're going to cut prices and release Windows 8.1. Okay, but what about those people who took the risk first and got hosed? Bill Gates should send everyone of them a computerized, hand written note saying, "You took a bet on us, and we let you down. We've learned and I promise you that it won't be at your expense. Come to a Microsoft Store, let us swap you out to a new machine, transfer your data to Sky Drive, and we'll give you a coupon for the price difference that you can use at the app store. Bill" Let the accountants get busy. No one will care, except for consumers who would be shocked by a show of customer care, strength and confidence. It won't happen, but it should.